Saturday, February 22, 2014

Rubenstein's Decade of Tax-Break Funded Philanthropy

The latest NYT billionaire pander piece lathered Carlyle Group co-founder David Rubenstein with praise over his "patriotic philanthropy."

“The United States cannot afford to do the things it used to do,” Mr. Rubenstein said.

Nearly fifteen years of out of control federal deficits coincided with the virus like spread of private equity underwriters (PEU's).  Both the Red and Blue political teams set the stage for corporate flippers to profit handsomely.  In return flippers, or their affiliates, gave generously to both parties and their candidates.

Many public servants ended up on Carlyle's or other PEU payrolls after leaving office.  This is the system that caused the United States to not be able to afford the things it used to do.  In that system Rubenstein profited mightily. 

Carlyle intends to monetize a portion of its equity in PQ Corporation via an independent public offering.  PQ started its PEU sentence under CCMP Capital Partners.  A look at PQ's PEU history and Carlyle's concomitant growth show:

Carlyle's assets under management grew ten times in the last ten years.  The Grinch's heart only grew three sizes when he heard the Who's singing Christmas morning with no presents, food or trappings?    How many people working in PEUville wake up and sing with their pension plan frozen or gone, their retiree benefits jettisoned to an individual exchange so the employer can limit their contribution, or their job eliminated and sent south or overseas?

Carlyle's Rubenstein is a lifelong student of history.  His $10 million donation to Monticello becomes more interesting when one realizes Thomas Jefferson had the funds to free his slaves from the death of a good friend.  Jefferson's friend bequeathed his fortune under that sole condition.   The man who wrote "All men are created equal" turned down the offer, instead taking out a loan using slaves as collateral.  One might say Jefferson was a PEU founder, or at least, an early visionary.

Rubenstein and his PEU brethren profited handsomely through the federal government's creating and funding favored industries, whether those be defense, homeland security, infrastructure or healthcare.  Also, the federal government taxes the Carlyle's like a nonprofit, community hospital.  That's charity if I've ever seen it.  Rubenstein is clearly one major recipient.

It's nice he gives a smidgen of it back.

Bonus fact:  CCMP Capital Partners employed White House health reformer Nancy-Ann DeParle, who after crafting PPACA returned to her PEU ways with Consonance Capital.  There are curious financial filings while she served as Counselor to President Obama.  Post public service she was also named to the boards of giant hospital company HCA and CVS-Caremark.

Update 2-24-14:  Rubenstein's fellow co-founder Daniel D'Aniello gave $20 million to the American Enterprise Institute, a Red Team D.C. based think tank.   Note that think tanks are ofter the initial landing spot for retired public servants, prior to their making their PEU move.